Limited Liability Company

The NV is a limited liability company which is available to residents and non-residents alike. An NV operated by non-residents and trading outside Aruba is an offshore NV, whereas an NV controlled by residents and trading inside Aruba is an onshore NV. A more favorable fiscal regime applies to an offshore NV than to an onshore NV.

The NV is subject to a much more complicated regulatory regime than the AEC (see below) which is the normal form of choice for offshore operations. The following are the main rules applying to an NV:

The minimum authorized share capital is 50,000 Aruba Florins of which 20% must be issued, and a minimum of two subscribers are required;

An NV must both file accounts and have those accounts audited;

The NV's incorporation document must be published in the official gazette, and corporate details including the director's name need to be entered in the Commercial Register;

In order to trade, an NV must apply for a business license to the Minister of Economic Affairrs;

If the director of an NV is a foreigner then an application for a director's license must be made to the Minister of Economic Affairs;

Stamp duty is payable on incorporation;

In order to open a bank account a certificate from the chamber of commerce must be lodged and the identity of the beneficial owners disclosed;

Shareholders' meetings must be held in Aruba and must be minuted.

Companies involved in the provision of financial service activities must by law use an NV as a corporate vehicle.

Fees payable on incorporation and annually depend on capital; for the minimum level of Af 50,000 the fee will be Af 75. 

Other fees for clearance of the name from the Ministry of Justice, for entry into the Commercial Register, and for registration of directors, will amount to a few hundred florins. Professional fees will be extra.

Legislation establishing the Aruba Exempt Corporation (AEC) or Aruba Vrijgestelde Vennootschap was passed in 1988. It is considered a more attractive corporate vehicle than the NV since it is subject to fewer formalities and regulatory restrictions. It is a limited liability company whose shareholders' liability for the company's debts is limited to the amount of unpaid share capital.

The AEC is known as the "zero tax corporation" since no tax is payable so long as all business income arises outside of Aruba and so long as the company is not controlled directly or indirectly by Aruban residents

The following are the key characteristics of the AEC:

The minimum authorized share capital is 10,000 Aruba florins of which a minimum of one share of one Aruba Florin must be issued;

Capital can be expressed in any currency;

A single subscriber is permitted for incorporation and there is no need to publish incorporation details in the Official Gazette;

No stamp duty is payable on incorporation;

Shares can be voting or non-voting, limited voting, preference or cumulative preference. Bearer and no par value shares are permited.

If the director of an AEC is a natural person then that person must be a non- resident, but if the director is a company then resident corporate directors are allowed;

Directors' and business licences are not needed;

An AEC must have a registered office and a locally licensed legal representative;

There is no requirement to prepare or file financial accounts unless the company has an authorized capital of more than 50,000 Aruba Florins in bearer shares

An AEC cannot conduct business activities in Aruba other than activities in connection with the maintenance of its office there;

AECs are not subject to foreign exchange restrictions;

Shareholders' meetings can be held anywhere in the world and need not be minuted.

The annual registration fee payable to Government is US$285, and a further $40 is payable to the Commercial Register. Fees will also need to be paid to the resident agent.

The incorporation time schedule is reasonable. Registration of a company takes only a few days which by the standards of civil law jurisdictions is very quick.

Partnerships are recognised under the Aruban Commercial Code. In the General Partnership (vennootschap onder firma) each partner is liable for all the debts of the partnership, as in common law partnerships. There are no filing requirements, and no auditing requirements. Partnerships are fiscally transparent.

Details of partnerships and of the partners must be entered in the Commercial Register at the Chamber of Commerce.

The limited partnership (commanditaire vennootschap) is similar to the general partnership except that it has one or more general partners with unlimited liability, who manage the partnership, and one or more limited partners each of whose liability is limited to the amount of his contribution. 

The identity of the limited partners does not have to be disclosed or entered in the Commercial Register.

Most offshore operations in Aruba take the form of an Aruban Exempt Corporation (Aruba Vrijgestelde Vennootschap).

Offshore financial institutions are obliged to use the NV form (Naamloze Vennootschap).

In both cases there must not be direct or indirect ownership by Aruban residents if offshore status is to be maintained.

The formation process for an Aruban Exempt Corporation (AEC) is more straightforward than for an NV, and confidentiality is better. 

AECs do not have to prepare or file accounts.

General principles of Aruban corporate taxation, which apply to offshore and other tax-privileged entities only to the extent that they are required to pay tax. 

The taxation of Aruban companies is governed by the National Ordinance on Profit Tax; special taxation regimes apply to various different types of activity or company, as follows, providing all income is derived from external operations (exemption for the AEC is statutory - in other cases advance rulings need to be obtained from the tax inspectorate)

These companies are exempt from corporate income tax where the initial investment is not less than 1 million Aruba florins. In the case of hotels the exemption can be granted for a maximum period of 10 years whereas in the case of a developer of fallow land the period is at the discretion of the Government, and the following additional benefits apply:

exemption from income tax on dividends paid out to shareholders, provided the dividends are paid within two years after the year in which the profit has been made;

exemption from import duties on building and construction supplies for hotels, roads and infrastructure;

exemption from corporate tax on profits derived from the sale of improved land and premises;

exemption from real estate tax.

These companies are exempt from corporate income tax for a period of 10 years provided that the initial investment is not less than 100,000 Aruba florins, and the following additional benefits apply:

exemption from income tax on dividends paid out to shareholders, provided the dividends are paid within two years after the year the profit has been made;

exemption from import duties on building supplies for premises;

exemption from import duties on packing materials, machinery and equipment, raw materials, semimanufactured products and components, to be used in the production process;

exemption from real estate tax.

The Free Zone was created to boost exports and increase foreign exchange earnings. Characteristics of the Free Zone are as follows:

The major attraction of operating in the Free Zone is the regime of special fiscal incentives which are granted for a maximum period of 10 years to companies operating within the zone and which include a corporate income tax rate of 2% on profits generated from all export sales and a waiver of import duties on all goods imported into Aruba for use in a manufacturing process which will result in a finished product for export

The regime of special fiscal incentives is heavily biased towards exports with the consequence that although a company operating within the Free Zone can sell a maximum of 25% of its goods in Aruba, goods sold locally attract normal corporate income tax rates as well as import duty;

There are a number of international agreements in place which increase the attractiveness of the Free Zone as a location in which to site a manufacturing operation. Under the Generalised System of Preferences primary, semi-manufactured and manufactured goods originating in Aruba gain either full free entry or entry at reduced import rates to the USA, EU, Australia, Canada, Japan, New Zealand and Norway;

Since Holland is a member of the EU and Aruba is a part of Holland goods originating in Aruba which have been substantially transformed from imported materials and components can be exported free of any import duties and quotas to the single market. The European Union offers greater possibilities than those available under the Generalised System of Preferences;

Aruba has been designated a beneficiary territory of the Caribbean Basin Economic Recovery Act 1983 the centerpiece of which program is duty free entry into the USA of a wide range of products grown, manufactured and directly imported from a beneficiary territory provided that at least 35% of the article's customs value is attributable to the beneficiary territory. Where the components originate in the USA the 35% criteria is even easier to satisfy and has led to a situation where goods which were once excluded (e.g. footwear, handbags and luggage) are now included.

This section refers to the taxation of foreign employees of offshore operations, general principles of individual taxation in Aruba, which also apply to the resident employees of offshore entities.

Residence (and not nationality) is the criteria for determining when and how much personal income tax is to be levied.

Although there is no difference in the rates of personal income tax payable by residents and non-residents alike, there is a substantial difference in the categories of income which are assessed to personal income tax with non-residents receiving considerably more favorable treatment. 

Thus although residents pay personal income tax on employment income received from an Aruba entity irrespective of whether the employment income relates to work done in Aruba or abroad, non-residents only pay personal income tax on that portion of the employment income which relates to work done in Aruba (unless by way of exception the employer is an Aruba public company).

Residents are assessed on all dividends received irrespective of their source whereas non-residents are only assessed to personal income tax on dividends received from Aruba onshore companies.

There are no foreign exchange controls as such in Aruba, however foreign exchange transactions are reported to the Central Bank, and there a number of regulations concerning transfers of foreign exchange, plus a tax of 1.3% on many transfers.

Offshore NVs, Aruba Exempt Corporations, and Free Zone companies are all exempt from these regulations and the tax.

The AEC and the offshore NV, which are the sole corporate vehicles through which "offshore activities" can be conducted, are not allowed to trade in Aruba and must be wholly owned by non-residents if they are to qualify for the regime of special offshore tax incentives. 

The prohibition on trading in Aruba does not mean that these entities cannot have their center of operations in the island or direct activities from there but it does mean that they can neither trade with locally based companies (except with other offshore entities) or individuals nor own real estate in Aruba.

A non-citizen who wishes to work in Aruba must obtain a work permit from the Minister of Justice, which will only be granted if no suitable local applicant is available. 

Applications must be filed by the potential employer who will bear the costs. The principal documents to be attached to the application include an official certificate from the police authorities in the country of origin certifying that the applicant has no serious criminal convictions, a medical certificate certifying that the applicant carries no contagious disease and has no mental illness, copies of job advertisements placed in local newspapers to which no suitable local applicants replied, certificates verifying the employee's qualifications and the contract of employment which must be in accordance with Aruba labor laws.

An application for a residence permit will normally be submitted at the same time as an application for a work permit and includes many of the same requirements. However where the applicant wants a residence permit without a work permit the chief requirement will be to prove that he will not become a burden to the state and that he has sufficient funds to support his stay. 

In order to satisfy this criteria the applicant will be required to provide satisfactory bank references.